ICANN's interference with VeriSign's introduction of new domain name system (DNS) services has been a source of tension for years. It came to a head in February when VeriSign filed a seven-count lawsuit against ICANN, alleging that ICANN's regulatory interferences breach multiple provisions of ICANN's Registry Agreement with VeriSign, interferes with VeriSign's business relations and violates Section 1 of the Sherman Act.

On Thursday, Judge Matz dismissed the antitrust claim, and directed that the case be transferred to state court where the remaining claims can be tried. He held that VeriSign's detailed allegations that competitors had captured ICANN's decision-making process were insufficient to establish an antitrust conspiracy, since VeriSign failed to allege facts establishing that competitors "controlled" or "dominated" ICANN's board.

I recently wrote a paper arguing that ICANN's regulatory excesses stifle innovation in domain name services, and that reliance on competition, rather than regulation by ICANN, would best serve consumers. Matz takes a rather narrow view of the corporate decision-making process, especially in light of the specific evidence of competitors' key role in many of ICANN's decisions, and even a statement by former ICANN president Stuart Lynn that ICANN's process was "too exposed to capture by special interests." (Judge Matz dismissed this by observing that Lynn had not actually "admitted" that the Board had been captured). But an antitrust claim is admittedly a blunt instrument for curbing ICANN's abuses. Press reports indicate that VeriSign will not appeal this decision (which would add further to the delay in introducing new services), but rather will pursue its state law claims.

As VeriSign's complaint and numerous critiques confirm, ICANN is out of control. It was created to promote competition in domain name services (DNS), given a very narrow regulatory mandate, and directed to meet basic standards of fair and open decision-making. It has adopted an increasingly expansive view of its regulatory mandate while providing virtually no procedural protections to affected parties. And its processes are clearly subject to capture. As a result, ICANN is delaying indefinitely the introduction of beneficial services.

Fortunately, Judge Matz's decision leaves VeriSign free to enforce ICANN's obligations under the Registry Agreement and related obligations in state court. ICANN's position clearly raises risks of regulatory abuse. But the Registry Agreement also contains provisions designed to prevent regulatory abuse by limiting ICANN's power and restricting the manner in which it can be exercised. ICANN should be strictly held to the letter and spirit of these protections.